Knowledge Assessment – I

1. Explain the meaning of term „salary‟.

2. List the items included under the head „salaries‟.
3. Define the term „allowances‟.
4. State the different types of allowances and their taxability as per provisions of Income tax act.
5. Define the term „perquisites‟.
6. List different types of perquisites made available to salaried employees.
7. Compute the value of such perquisites.
8. Explain the provisions of Income tax act, 1961 in relation to benefits received by an employee after
retirement from employer.
9. Name different types of Provident funds and their tax treatment for tax purposes.

b) ₹ 3,50,000
c) ₹ 3,00,000
2. Gratuity shall be fully exempt in the case of –
a) Central and State Government employee
b) Central and State Government employee and employees in case of local authorities
c) Central and State Government employee, employees of local authorities and
employee of Statutory Corporation.
3. Commuted pension received shall be fully exempt in case of –
a) Government employee
b) Government employee and employees in case of local authorities
c) Government employee, employees of local authorities and employee of Statutory
Corporation.
4. For the purpose of calculating exemption of gratuity, salary shall include –
a) Fixed commission
b) Commission if it is a fixed percentage on turnover
c) None of these two
5. Encashment of leave salary at the time of retirement is fully exempt in the case of –
a) Central government employee
b) State government employee
c) Both central and state government employees

EXERCISE QUESTIONS

Short Answer Questions

1. Define the term „salary‟ as per Income Tax Act.
2. Salary is taxable either on due basis or on receipt basis. Discuss
3. Define perquisites
4. Name five perquisites which are tax free
 5. Explain the meaning of sweat equity shares.
6. What do you mean by „profit in lieu of salary‟?
7. Name five deductions eligible under section 80C
8. Briefly explain the retirement benefits available to an employee
9. Mention any five allowances which are fully taxable in the hands of
specified employees.

Long Answer Questions

1. State different types of Provident Funds of which a salaried person may
be a member and related provisions of each.
2. Write short notes on:
(a) Provisions regarding gratuity
(b) House Rent Allowance
(c) Perquisites taxable only in case of specified employee
3. Discuss the mode of computation of taxable value of rent free accommodation.
4. Discuss the provisions regarding taxability of:
i. Pension
ii. Leave salary
5. Discuss the provision regarding valuation of motor car and other
vehicle, taxable in the hands of specified employees.